ITALY: INCHING OUT OF THE GLOBAL CRISIS

The paper highlights two aspects of the policy challenges facing Italy during the crisis of 2008-2009. First, in order to get out of the recession, there was little that Italy could do by itself, especially in terms of short-run policies. Its monetary and exchange rate policy is set by the European Central Bank (ECB). Its fiscal policy is effectively blocked by its enormous debt. Its ability to reform is hindered by the lack of social and policy consensus, and by the deterioration of the climate for public and policy debates. In this respect, the policy choice has been not to fight the recession head on, but to minimize some of its social costs. Within these limits, results have been positive. Second, the measures that have been adopted are going to have at best a modest influence on the causes of Italy’s persistent slow growth. They are qualitatively insufficient to promote a more sustained recovery and to reactivate a growth process, the engines of which have been stalled for quite some time. One possible outcome is that Italy is likely to remain a country in relative decline.